Medical technology company,
) recently proposed to relocate Greatbatch Medical's orthopedics
manufacturing business from Orvin and Corgemont in Switzerland to
the company's other facilities located at Tijuana, Mexico and Fort
Wayne, Indiana. The company plans to complete the relocation by the
end of 2013.
The proposal represents the company's intention to cut costs and
improve efficiencies. The company's orthopedics segment's
performance has been affected by the challenging market conditions.
Greatbatch Medical's, Orthopedic sales plunged roughly 22% to $31
million due to the lack of product expansion and development
initiatives in the first-quarter of fiscal 2012. Thus, in order to
increase operating performance and propel growth, the company plans
to consolidate this business.
Greatbatch's acquisition of Precimed in 2008 and the global
recession that followed immediately thereafter affected the
company's orthopedic business adversely. Since then the company has
been facing problems related to product launches as well as pricing
pressure from its customers. All these difficulties prompted
management to take this decision as they believe that the
facilities at Fort Wayne and Tijuana are more efficient and cost
Greatbatch Medical will continue its orthopedic operations in
Switzerland but on a much smaller scale. The relocation decision
would impact up to 90% of the 196 employees at Orvin and Corgemont
but according to Swiss law, they still have an opportunity to voice
their opinion before any final decision is made. The consultation
period ends on July 20, 2012.
Greatbatch is a leading producer and supplier of batteries,
capacitors and components used in implantable medical devices. The
company's top customers include
Johnson & Johnson
St. Jude Medical
Greatbatch has been acquiring complementary businesses over the
last few years in a bid to expand. The company has a strong
pipeline with a number of products currently in development that
should support growth in the long run.
However, soft Cardiac Rhythm Management and Orthopedic markets
and pricing pressure remain headwinds. We currently have a Neutral
recommendation on Greatbatch. The stock currently retains a Zacks
#3 Rank, which translates into a short-term Hold rating.
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